As the Housing Bubble Inflates: Month 9

Yesterday was all abuzz as the just-released Case-Shiller index for March 2013 revealed that home prices in the U.S. had increased by 10.9 percent from their March 2012 level.

That, of course, is nearly two-month old news. Our first chart jumps a month forward in time to see where things stand through April 2013:

Here, the U.S. Census Bureau reports that median new home sale prices in the U.S. reached a preliminary record value of $271,600 in April 2013, with the 12-month trailing average of median new home sale prices reaching a preliminary record value of $250,633. We say these values are preliminary since they will be revised as additional data is recorded in the next several months. The recent trend has been for the data to be revised upward.

Meanwhile, Sentier Research indicates that median household income has reached a value of $51,546 in April 2013, up from the $51,320 that they previously reported for March 2013. Here, the 12-month trailing average of median household income in the U.S. is $51,301.

In the nine months since the second U.S. housing bubble began to inflate in July 2012, the median sale price of new homes in the United States has increased at an average rate of well over $22 for each $1 increase in median household income. The only period of time in modern American history that had a similar rate of price escalation was the original inflation phase of the first U.S. housing bubble.

Our second chart shows more of that history. The red-dashed line box in the upper right hand corner is detailed in our first chart:

Meanwhile, the staff of the Wall Street Journal is resisting the mere idea that a new bubble has begun to inflate in the U.S. housing market:

Some regions are seeing a surge of housing demand amid extremely low interest rates and investors searching for opportunities. And it is true that some regions are up more than 25% from their bottom. But as Dan Greenhaus of BTIG LLC points out, none of the 20 cities tracked by the Standard & Poor's Case-Shiller home-price indexes is back to its peak level.